Shareholders Agreement: majority/minority shareholders

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Shareholders Agreement between majority and minority shareholders in a private limited company. 

Shareholders in a company where one shareholder holds a majority of the shares (more than 50%) and the other shareholder holds a minority of the shares (less than 50%) should consider having a shareholders agreement to regulate the management of the company and their relationship as shareholders.  

 

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Shareholders Agreements: majority/minority shareholders

Shareholders Agreement between majority and minority shareholders

Background: Shareholders Agreements 

Shareholders in a company where one shareholder holds a majority of the shares (more than 50%) and the other shareholder holds a minority of the shares (less than 50%) should consider having a shareholders agreement to regulate the management of the company and their relationship as shareholders.

Their agreement should reflect the usual matters covered by a shareholders agreement but in a manner which reflects the relative ownership and control of the company.

As the holder of a majority of the shares, the majority shareholder will expect to be able to determine the day to day control and management of the company.  This control and management will be documented by clauses in the shareholders agreement which entitle the majority shareholder:

  • to appoint a majority in number of the board of directors of the company
  • to pass board decisions (by virtue of its appointed directors) to enable the day to date management and running of the company
  • to pass shareholder resolutions which require a simple majority vote
  • to be able to sell the company and to require the minority shareholder to sell its shares on the same terms (drag-along rights)

Depending on the percentage share of the issued shares that the minority shareholder holds, the minority shareholder will want the shareholders agreement to include clauses which entitle the minority shareholder:

  • to appoint a director
  • to approve specified material matters (reserved matters)
  • to be offered the opportunity to sell its shares on the same terms should the majority shareholder sell its shares to a third party (tag-along rights)

The exact scope of the control rights of the majority shareholder and the rights of the minority shareholder will be a matter for negotiation between them.

About this Shareholders Agreements

This is a shareholders agreements between majority and minority shareholders in a private limited company.

Document features

  • Full form shareholders agreement between majority and minority shareholders
  • Clauses relating to the following matters:
    • Business of the company
    • Shareholder roles and services
    • Shareholdings
    • Funding
    • Director appointment rights and board decision-making
    • Shareholder decision-making
    • Rights to dividends
    • Matters requiring prior approval of specified shareholders (“reserved matters”)
    • Future share issues
    • Transfers of shares
    • Shareholder information rights
    • Shareholder restrictive covenants
    • Duration and termination

Explanatory guidance

As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.

Shareholders Agreement: Majoirty/minority agreements

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